2009 (11) TMI 702 - AT - Central Excise

Summary

Issues:
- Confirmation of demand of duty, interest, and penalty on sale of waste and scrap
- Exemption under Notification No. 65/95 for goods used for repairs or maintenance
- Clearance of scrap without payment of duty
- Proper maintenance of accounts for goods manufactured
- Dismantling and sale of old machinery as scrap
- Adjudication of demand, interest, and penalty
- Challenge before Commissioner (Appeals) and penalty enhancement
- Appeal to Appellate Tribunal CESTAT Mumbai

Confirmation of Demand of Duty, Interest, and Penalty:
The appeal was filed against the confirmation of demand of duty, interest, and equivalent penalty due to the sale of waste and scrap. The appellant, a manufacturer of sugar and molasses, generated scrap during manufacturing processes, including the dismantling of old machinery. The department considered this scrap as dutiable, leading to a demand of Rs. 75,674 along with interest and a penalty. The appellant contested that the waste and scrap were not manufactured products under the Central Excise Act, thus not liable for duty.

Exemption under Notification No. 65/95 and Proper Maintenance of Accounts:
The appellants argued that the waste and scrap generated from old machinery during repairs and maintenance were not subject to duty as per Notification No. 65/95. However, the department contended that the appellants failed to maintain proper accounts for the goods manufactured, including the scrap generated, leading to a demand for duty, interest, and penalty.

Challenge and Penalty Enhancement:
The adjudication order was challenged before the Commissioner (Appeals), who confirmed the demand and enhanced the penalty equal to the duty amount. The appellant further appealed to the Appellate Tribunal CESTAT Mumbai, disputing the imposition of penalty and asserting that the waste and scrap were not dutiable products.

Suppression of Facts and Liability for Duty:
During the investigation, it was revealed that the appellants were manufacturing parts/components in-house and clearing scrap without paying duty or accounting for it properly. The Central Excise officers found that the appellants suppressed facts to evade duty payment, leading to the imposition of demand, interest, and penalty. The Tribunal upheld the decision, stating that the appellants were liable to pay duty on the waste and scrap generated from machinery on which Cenvat credit was availed.

In conclusion, the Tribunal upheld the demand of duty, interest, and penalty on the sale of waste and scrap, rejecting the appellant's arguments regarding exemption, limitation, and penalty imposition. The decision highlighted the importance of proper record-keeping, compliance with excise regulations, and the consequences of suppressing information to evade duty obligations.